Chan v Valmorbida (No 2)
[2020] VSC 633
•28 September 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S CI 2017 03211
| KAIRU (‘ERICA’) CHAN & ORS | Plaintiffs |
| v | |
| VALMORBIDA CUSTODIANS PTY LTD (ACN 609 840 539) & ORS (according to the Schedule) | Defendants |
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JUDGE: | DELANY J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 25 September 2020 |
DATE OF RULING: | 28 September 2020 |
CASE MAY BE CITED AS: | Chan v Valmorbida (No 2) |
MEDIUM NEUTRAL CITATION: | [2020] VSC 633 |
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PRACTICE AND PROCEDURE – Application to amend defence including to withdraw admissions previously made – Where no evidence in support of the withdrawal of admissions – Good cause not shown – One amendment to correct error allowed – Gregorich v Khouri [2020] VSC 5, Collie v Merlaw Nominees Pty Ltd(in liq) & Anor [2001] VSC 39 applied – Civil Procedure Act 2010 (Vic) s 18 and s 23.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms C Sparke QC with Mr J Barber and Mr J Carney | Arnold Bloch Leibler |
| For the Defendant | Mr S Senathiraja QC with Mr J Graham | Lawson Hughes Peter Walsh |
HIS HONOUR:
Introduction
The plaintiffs apply by summons dated 16 September 2020 to strike out paragraphs 38(a)(i), 42(b), 47 and 48 of the amended defence of the 2nd to 4th defendants (‘the trustees’) dated 28 August 2020 (‘amended defence’). The amended defence pleads to the plaintiffs’ amended statement of claim dated 24 July 2020 (‘ASC’). The trustees apply by letter for leave to file and serve the amended defence. The issue concerning the specific paragraphs identified in the summons concerns the withdrawal of admissions made by the trustees in their original defence dated 20 September 2017 (‘original defence’) and whether leave should be given to file and serve the amended defence in a form that withdraws previous admissions as contended for on behalf of the trustees.
The principles
The power to amend in r 36.01(1) of the Supreme Court (General Civil Procedure) Rules 2015 authorises the Court to order, or grant leave to amend any pleading for the purpose of determining the real question in controversy between the parties to the proceeding, to correct any defect or error in the proceeding, or so as to avoid multiplicity of proceedings.
The parties to the application are agreed that the decision of Nichols J in Gregorich v Khouri[1] helpfully identifies the principles to be applied on such an application:
[1][2020] VSC 5.
5.Pursuant to rule 36.01 of the Supreme Court (General Civil Procedure) Rules 2015 the Court may at any stage order that any party have leave to amend any document in the proceeding, for the purpose of determining the real question in controversy between the parties, correcting any defect or error in the proceeding or avoiding multiplicity of proceedings.[2]
6.Whether an amendment should be permitted is a matter of discretion, to be exercised according to an assessment of where justice lies. While it is neither possible nor desirable to delimit the factors that the Court may take into account in exercising the discretion,[3] some considerations that should inform the exercise of the discretion have been considered in the authorities.
7.An amendment will not be permitted where it would cause irremediable prejudice to the other party. On an application to amend the applicant bears the burden of persuasion that the amendment will not cause such prejudice, while the party opposing the amendment bears an evidential onus of adducing evidence on the question of prejudice. The question is whether the possibility of prejudice or injustice to the opposing party has been excluded. If it has not, the application must be refused. It must also be refused if the Court concludes that it cannot decide whether it is just to allow the amendment.[4]
8.The loss of an opportunity to take a step in the proceeding in response to a denial may constitute relevant prejudice.[5] An order for indemnity costs may not always undo the prejudice a party suffers by a late amendment.[6] Case management considerations may inform the justice of the grant or refusal of an application to amend.[7]
9.A court will usually require an explanation for the change in position.[8] In McKenzie v Commonwealth[9] and in Jeanes vCommonwealth[10] Gillard J said that it is not the law that a defendant is not permitted to withdraw an admission unless it was shown to have been made inadvertently or through error, and that the absence of a reasonable or adequate explanation will not determine the outcome of an application in the face of compelling reasons of justice.[11] As Gillard J observed, the criteria for the exercise of the discretion conferred by Rule 36.01(1) are those articulated in the Rule itself.[12] Accordingly, there is no separate rule that the reasons for and explanation of a change of position will of themselves dictate the outcome of an application to withdraw an admission.
10.Nevertheless, an explanation is ordinarily called for in recognition of the fact that the making of an admission is regarded as a serious step for a party to take – its effect being to remove the admitted fact from the arena of controversy between the parties.[13] Thus it has been said that a party will not be permitted to withdraw an admission in a pleading ‘without good cause’.[14]
11.That is a more particular emanation of the principle that generally speaking, where a discretion is sought to be exercised in favour of one party and to the disadvantage of the other, an explanation will be required. An explanation is required in order to permit the court to see that the application is brought in good faith and to weigh the circumstances against the effects of an amendment and the objectives of the relevant rule.[15] In Aon Risk Services[16] French CJ said that one consideration in the exercise of an interlocutory discretion is the potential loss of public confidence in the legal system which arises where a court is seen to accede to applications made without adequate explanation or justification.[17]
12.It has been often said in the context of applications to withdraw admissions, that the explanation proffered should be based on evidence of a ‘solid and substantial character’.[18] However, what is adequate will depend upon the circumstances of the particular case.
13.Finally, it is now understood (at least since the High Court’s decision in Aon) that parties must be given a fair trial and a sufficient opportunity to identify the issues they seek to agitate, but according justice in an application to amend is not to be equated with a requirement to afford a party an unlimited opportunity to amend its case.[19]
[2]Rule 25.02(5) provides that rule 25.04(b) (which permits a defendant to withdraw a defence or any part of it at any time) does not enable a party to withdraw an admission operating for the benefit of another party without the consent of that party or leave of the court.
[3]Burkett v Bendigo and Adelaide Bank (No 3) [2019] VSC 45 (Burkett), [14] and the authorities there cited.
[4]Amcor Packaging (Australia) Pty Ltd & Ors v Australian Corrugated Box Co Pty Ltd & Ors [2013] VSCA 223, [65], [66].
[5]Burk v Commonwealth of Australia (No 3) [2004] VSC 210, [70] and the authorities there cited.
[6]Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 (Aon), [99]-[100].
[7]Aon, [94]-[98]; Burkett, [15].
[8]McKenzie v Commonwealth of Australia [2001] VSC 361 (McKenzie), [45].
[9]McKenzie.
[10]Jeanes v Commonwealth of Australia [2005] VSC 488 (Jeanes).
[11]McKenzie, [44]-[45]; Jeanes, [19].
[12]McKenzie, [23].
[13]Collie v Merlaw Nominees Pty Ltd(in liq) & Anor [2001] VSC 39 (Collie), [94]-[95] and the authorities there cited.
[14]Collie, [94]-[95].
[15]Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 (Aon), 215 [103].
[16]Aon.
[17]Aon, 192 [30].
[18]Celestino v Celestino [1990] FCA 299, [12]; Ridolfi v Rigato [2001] 1 Qd R 455; Permanent Trustee Co Ltd v Gulf Import and Export Co [2006] VSC 110, [10].
[19]Aon, 212-213 [94]-[99], 217 [112].
In Divcon (Aust) Pty Ltd v Devine Shipping Pty Ltd [1996] 2 VR 79, Beach J said (at 80):
An admission in a pleading is a serious step for a party to take. It means that proof is no longer required or permitted of the fact admitted as the fact is no longer in controversy between the parties: see Pioneer Plastic Containers Ltd v Commissioners of Customs and Excise [1967] Ch. 597. Further, admissions by pleading entitle the court to make orders in favour of a party to which that party is entitled on those admissions. See r 35.04. As a matter of principle a party who has made an admission in a pleading should not be entitled to withdraw that admission without good cause, for example, that the admission was made in error by the party who prepared or gave the instructions for the preparation of the pleading, or as the consequence of a misapprehension by counsel or solicitor concerning the client’s instructions.
Mr Senathiraja QC who appeared with Mr Graham on behalf of the trustees submitted the Court was required to determine the application by responding to two questions:
(a) first, do the paragraphs in question raise real issues in dispute that need adjudication; and
(b) second, do the proposed amendments cause any relevant prejudice.
Ms Sparke QC, who appeared with Mr Barber and Mr Carney for the plaintiffs, did not accept that the application was to be determined by the Court responding to those two questions. The submissions on behalf of the plaintiffs were to the effect that the onus is upon the party seeking to amend or to withdraw admissions to establish ‘good cause’. It is not enough that proposed amendments to the original defence raise new issues or that three years on from the original defence Counsel thinks it a good idea to amend the pleading. It was submitted that the onus is upon the applicant for withdrawal of an admission to show a good basis for the grant of leave to do so.
It was submitted on behalf of the trustees that in the present case pleadings have not closed. That is an accurate statement given that earlier on 25 September 2020 orders were made permitting the plaintiffs to file and serve a further amended statement of claim by 28 September 2020. It was further submitted that there is no prejudice to the plaintiffs if the admissions made are permitted to be withdrawn. The trustees submit that the pleading should not be allowed to take precedence over the real issues in the proceeding and that the proposed amendments raise matters to enable those real issues to be identified and determined in circumstances where those issues had not properly been captured by the pleadings to date. The plaintiffs contend that even where pleadings have not closed, ‘good cause’ must be shown by the trustees to permit admissions previously made to be withdrawn.
As held in Collie v Merlaw Nominees Pty Ltd(in liq) & Anor [2001] VSC 39, the applicant for leave to withdraw an admission is required to show good cause.[20] That is particularly so in circumstances where, pursuant to s 18 of the Civil Procedure Act 2010 (Vic), a proper basis for the original defence, including for admissions made in that defence, is taken to have existed at the time each such admission was made. It matters not that pleadings are not yet closed. The Court proceeds on the basis that when that original defence was filed and admissions were made, the trustees were aware of and made such admissions in an endeavour to give effect to the overarching obligation in s 23 of the Civil Procedure Act to narrow the scope of issues in dispute, unless it was not in the interests of justice to do so or unless the dispute is of such a nature that only judicial determination is appropriate.
[20]Collie, [94]-[95].
Given ss 18 and 23 of the Civil Procedure Act, it is not sufficient to obtain leave to withdraw an admission that counsel takes a different view of what should be pleaded. As submitted on behalf of the plaintiffs, instructions are needed to bring an application to withdraw an admission. The need for instructions underpins the need for evidence that explains why an admission previously made is now sought to be withdrawn, unless it is obvious that the proposed amendment is necessary to correct an obvious inconsistency or error. Whilst each proposed amendment requires individual consideration, in the absence of evidence on affidavit, it will ordinarily be difficult for the applicant for leave to establish good cause as discussed in Gregorich, applying Collie.[21] For the Court to grant leave to amend so as to withdraw an admission previously made, in the absence of an explanation based on evidence of a solid and substantial character, runs the risk of the potential loss of public confidence in the legal system identified by French CJ in Aon.[22]
[21]Gregorich, [10]; Collie, [94]-[95].
[22]Aon, 192 [30].
Upon attention being directed to s 23 of the Civil Procedure Act and the obligation of the parties to narrow the issues, Mr Senathiraja, submitted that a balancing exercise was required. He accepted that if there was a change of substance, there was force in the argument that having narrowed the issues, the person who wished to expand them by withdrawing an admission of substance would need to put on evidence. However, weight was also, in his submission, required to be given to the importance of getting the real issues adjudicated upon.
In that context and in the context of the authorities to which the Court was referred, being examples of applications to withdraw admissions where in each case affidavit evidence in support was relied upon, it is striking that the trustees have filed no affidavit evidence in support of their application.
The specific amendments
Four paragraphs of the new defence are in issue. It is accepted on behalf of the plaintiffs that leaving those four paragraphs to one side, leave should otherwise be granted to the trustees to file and serve the new defence.
A helpful comparative table setting out the contentious paragraphs of the ASC, the original defence and the new defence, together with relevant parts of the recent defence and counterclaim of Mariano Valmorbida was provided to the Court on behalf of the trustees. A copy of that table, which will assist in understanding the reasons for the ruling given in respect of the four paragraphs in question, is annexed to these reasons.
Proposed paragraph 38
The ASC alleged at [38], a Decision made by Adrian and Mariano Valmorbida in about 2013. The original defence did not deny the Decision in terms.
The Decision in [38(a)] of the ASC is a decision with two separate components: first, (i) a decision to construct and develop five units on 17 Avoca Street; second, (ii) a decision to the construct a home for Adrian and his family on 19 and 21C Avoca Street. The original defence admits that aspect of the Decision concerning 17 Avoca Street, but expressly denies that aspect of the Decision concerning 19 and 21C Avoca Street. The proposed amended defence, if permitted, will deny ‘the Decision’. Accordingly, an expanded denial that includes the withdrawal of the previous admission of a decision to construct and develop five units on 17 Avoca Street.
In opposing leave the plaintiffs draw attention to the absence of any explanation why it is that the trustees now resile from that which was previously admitted. It is true that recent amendments to the statement of claim have inserted the word ‘and’ between [38(a)(i)] and [38(a)(ii)] linking the two allegations as part of the one decision. However, I accept the submission on behalf of the plaintiffs that amendment to the ASC by insertion of the word ‘and’ does not change the substantive plea previously made. The ASC already read as an allegation of a Decision concerning both the matters in [38(a)(i)] and [38(a)(ii)] of the ASC, one of which was previously admitted by the trustees and the other denied.
The original defence in [38(a)] went on to deny that there was any ‘valid’ agreement that 19 and 21C Avoca Street would be developed for the purpose of providing a home for Adrian and his family. It went on to say why that is alleged to be the case (at [38(a)(i)] and [38(a)(ii)] of the original defence). The plea asserting no ‘valid’ agreement is not directly responsive to ASC [38]. It responds instead to ASC [39], a separate plea of a Joint Venture Agreement to develop the properties.
The substantive difference between the original defence and what is now proposed is twofold. First, previously there was an admission that a Decision was made. Second, there was an admission that the Decision was that Golden Fin would develop 17 Avoca Street with five units that would be let to Golden Fin to generate income for the Ferval Trust. Those admissions are of substance. They are of substance because the allegations on behalf of the plaintiffs include that in breach of duty by Golden Fin as trustee, the development of 17 Avoca Street was abandoned, resulting in there being a loss of income and a wasting of trust assets in a trust of which the plaintiffs are discretionary beneficiaries.[23] On the pleadings as they currently stand such abandonment occurred after a decision, admitted to have been made, to construct the units to generate income for the trust.
[23]Amended Statement of Claim dated 24 July 2020, Chan v Valmorbida S ECI 2017 03211 [75]-[76].
The Decision which the plaintiff pleads in [38] of the ASC is not the same as the decision admitted in [38(a)(iii)] of the original defence, however for the reasons stated it is nevertheless a material admission.
The allegation in ASC [38] concerning the Decision is carried through to [81] of the ASC, which relies upon the Decision as the basis for an estoppel pleading. The plaintiffs submit, correctly, that the fact the Decision was made which underpins the estoppel plea is not denied in the original defence; the only denial is a denial that the Decision involved a decision as to the second limb, a decision to the construct a home for Adrian and his family.
No evidence has been provided on behalf of the trustees in support of the application to amend which explains why the trustees now propose to deny that which they previously admitted. As Nichols J observed in Gregorich:
An explanation is ordinarily called for in recognition of the fact that the making of an admission is regarded as a serious step for a party to take – its effect being to remove the admitted fact from the arena of controversy between the parties.[24]
[24]Gregorich, [10].
In the circumstances ‘good cause’ has not been shown why the admission previously made should be permitted to be withdrawn.
It is also the case that the withdrawal of the admission, if permitted would cause prejudice to the plaintiffs. For that separate reason, leave should be refused.
The trustees allege that no prejudice is demonstrated and none was identified in submissions on behalf of the plaintiffs. However, many of the allegations in the proceeding, including the allegations concerning the Decision, concern communications that are in dispute between Adrian, who is deceased, and his father, Mariano. Whilst Mariano is now separately represented in his capacity as an added defendant, it is to be inferred that it was Mariano who was involved in giving instructions for the original admission. Mariano is available to give evidence. In circumstances where Adrian is deceased it seems to me that there is actual prejudice to the plaintiffs from any admission for which leave is given to withdraw which involves a factual contest between Mariano and Adrian as to what took place. I do not accept the submission on behalf of the trustees that an earlier admission made three years ago in the trustees’ original defence constitutes a ‘windfall’ for the plaintiffs. Such a ‘windfall’ argument does not sit comfortably with the obligations in ss 18 and 23 of the Civil Procedure Act.
For those reasons I will disallow the proposed amendment to [38(a)] of the new defence.
Proposed paragraph 42(b)
The trustees wish to withdraw an admission that Golden Fin, as trustee of the Ferval Trust, distributed land at 48-50 Edwardes Street, Reservoir to Mariano as a secondary beneficiary of that Trust.
The original defence admitted the distribution of Edwardes Street, Reservoir by Golden Fin as trustee of the Ferval Trust. The amended defence does not admit the fact of that distribution and in addition goes on to allege that there was a purported distribution or transfer of 21C Avoca Street to Adrian Valmorbida procured for no consideration without the informed knowledge/consent/ authority of Golden Fin, and other matters. The proposed amendment represents a substantive change. It changes an admission to a ‘does not admit’ and in addition pleads various reasons in support of the proposition that the distribution was in breach of duty. There is no explanation provided on affidavit for this substantive change of position. That is all the more surprising when the defence recently filed by Mariano admits paragraph 42(b).
Based on the original pleadings, and Mariano’s current defence, it is common ground that there was in fact a distribution. If the amendment is permitted the plaintiffs will have to prove that admitted fact.
In support of the amendments, the trustees directed attention to the pleadings in the related Golden Fin proceeding, where there is an allegation in the defence which links the distribution to Mariano of the Reservoir land with the distribution of 21C Avoca Street to Adrian. In the Golden Fin proceeding it is alleged that the distribution of the two properties was done ‘in conjunction’.[25]
[25]Defence dated 3 July 2017, Golden Fin v Chan S CI 2017 01845 [7(b)(iii)].
Ms Sparke submitted that the relevance of the Reservoir allegation in this case is twofold. First, as a fact that Mariano received a distribution of the Reservoir property. Second, as a response to the allegation that the Avoca Street property was distributed without Mariano’s consent. One might ask rhetorically, why was that property distributed without his consent when he makes no complaint about the distribution of the Reservoir property to him? As the pleadings currently stand, such an argument can be mounted on the basis that the distribution of the Reservoir property within a day or two of the distribution of the Avoca Street property is admitted. If the admission is permitted to be withdrawn, the fact of the distribution will first need to be proven.
The distribution of the Reservoir property to Mariano is also relied upon in the particulars to ASC [90D] in support of a plea that Mariano has shown a want of proper capacity to execute the trusts and to exercise discretions given to VCPL under the terms of the trusts.[26] The admission made in the original defence concerning the distribution of the Reservoir land is expressly particularised as a plea authorised by Mariano in support of allegations that Mariano first cast doubt about whether transactions in which he was directly involved had occurred, and then later abandoned that position, denying the validity of certain transactions.[27]
[26]Amended Statement of Claim dated 24 July 2020, Chan v Valmorbida S ECI 2017 03211, Particulars to [90D], (ii)E.
[27] Ibid, Particulars to [90D], (ii)E.
The proposed amendment, if allowed, will put in issue the fact that land at Reservoir was distributed by the trust to Mariano. If leave is granted the admission relied upon as a particular in support of the plea at ASC [90D] will not be available as a binding admission and the Court will have given leave to the trustees to withdraw that admission without any explanation. Particularly given the reliance upon that admission in paragraph 90D of the ASC, and the admission of paragraph 42(b) by Mariano personally, to permit the admission to be withdrawn in the absence of evidence on affidavit from Mariano would not only be to permit withdrawal without good cause being shown, but would also have the potential to erode confidence in the legal system for the reasons identified by French CJ in Aon.
If this amendment were to be permitted without an explanation from Mariano on affidavit, the plaintiffs would also likely suffer prejudice. They would not be able to rely upon the admission in the original defence in paragraph 42 in the same way in cross-examination of Mariano. The admission that had been made would have been withdrawn for unknown and unspecified reasons and such withdrawal would be able to be said to have been countenanced by the Court. That would be an entirely unsatisfactory state of affairs.
For those reasons leave is refused for the new paragraph 42.
Proposed amendment to [47]
The plea in paragraph 47 of the ASC concerns the distribution on 8 April 2016 by Golden Fin of one of ten shares in 19 Avoca Street to Adrian Valmorbida as a primary beneficiary. The trustees’ original defence admits there was a distribution, but says it was not effected with the informed knowledge/consent/authority of Golden Fin. The amendment, instead of admitting the distribution, refers to it as a ‘purported distribution’. It goes on to refer to it being purported, by reason of the fact, amongst other things, that it was without the informed knowledge/consent/authority of Golden Fin. Additional matters or new reasons why it is said that the actual distribution should be treated as a purported distribution are then set out.
The proposed amendment refers back to [36] of the trustees’ defence which concerns the original purchase of Avoca Street. There was discussion during the hearing about the possibility of the two allegations, the new [47] and [36] to which it refers being in some way inconsistent. I do not consider that to be the case.
Whilst there is some force in the submission on behalf of the trustees that in substance the amendments proposed are a reformulation with a different structure of what was essentially a qualified admission in [47] of the trustees’ original defence, it remains the case that if the pleading is allowed in its proposed form what was an admission as to the fact a distribution occurred will now be in issue. The Macquarie Dictionary relevantly defines ‘purported’ as ‘alleged to be so’.[28] If the proposed new [47] is permitted, when regard is had to the definition of ‘purported’ the defence puts back in issue whether there was in fact a distribution of one of 10 equal shares. That fact is currently admitted.
[28]Macquarie Dictionary (Online ed, 2020) ‘purported’ (def 2).
In the absence of any explanation on affidavit, let alone evidence of a ‘solid and substantial character’ there is simply no basis for the Court to grant leave to withdraw the admission. It certainly should not do so in the case of a proposed amendment which, if permitted, would create uncertainty for the plaintiffs, and for the Court about precisely what facts, if any, concerning the distribution are now in issue.
I do not propose to allow the amendment to the original [47] in the form of the proposed amended [47].
Proposed amendment to [48]
The trustees’ original defence to [48] admits that pursuant to the Joint Venture Agreement, Golden Fin entered into the Construction Contract.
Whilst in submissions Mr Senathiraja was a little less blunt in his description of the need to amend this paragraph of the defence, it is apparent to me that paragraph [48] of the original defence is inconsistent with the denial of the Joint Venture Agreement in [39] of the original defence.
Paragraph [39] of the original defence denies the alleged Joint Venture Agreement. It is inconsistent with that denial to then admit the building contract was entered into pursuant to the Joint Venture Agreement as is currently the case in original defence [48].
It appears to me that paragraph [48] of the original defence is a plea made in error. Given that there is no change proposed to the plea concerning the Joint Venture Agreement and given that there is only one Construction Contract which is now separately pleaded in proposed [38(c)] of the trustees’ amended defence, I propose to grant leave for this amended paragraph. The correction of an obvious error in the original defence, evident from an internal inconsistency in the pleading is not a matter that requires any evidence in order for leave to be granted.
Disposition
I propose to grant leave to the trustees to file and serve a further amended defence, substantially in the form of the amended defence dated 28 August 2020 but not including paragraphs 38(a)(i), 42(b) and 47 of the amended defence. The trustees have leave to amend those paragraphs, should they so desire, but not in an manner that withdraws admissions previously made. It is to be hoped there will be no controversy about the amendments made to paragraphs 38(a)(i), 42(b) and 47 when the new version of the amended defence is filed and served.
I will permit the trustees 14 days to file and serve such an amended pleading.
Costs
The correspondence demonstrates that on 15 September 2020, the solicitors for the trustees denied they were obliged to apply to the Court to obtain leave to withdraw admissions.[29] It was following that response that the plaintiffs issued their summons dated 16 September 2020.[30]
[29] Fourth Affidavit of Susanna Ford (‘Fourth Ford Affidavit’), 16 September 2020, exhibit SMF-42, p 13.
[30] Fourth Ford Affidavit, 16 September 2020, exhibit SMF-43, p 65.
The time taken in preparation for the hearing and in argument was time devoted to the question of whether or not leave should be given to the trustees to amend their defence to permit the withdrawal of admissions in the four specified paragraphs. In substance, the trustees failed in their application. To the extent they succeeded, it was success on a limited basis. In relation to that matter, amendment to paragraph 48, the trustees sought and were granted an indulgence.
In the circumstances, I will order that the trustees, D2-D4, are to pay the plaintiffs’ costs of and incidental to the summons dated 16 September 2020, of the application by the trustees by letter to amend their defence to withdraw admissions and of so much of the hearing on 25 September 2020 as was concerned with those issues. I otherwise reserve the costs of all parties of the directions hearing on 25 September 2020, including Mariano Valmorbida.
Annexure: Comparative table of paragraphs 38, 39, 42, 47 and 48
| ASC | Trustees’ Original Defence | Trustees’ New Defence | Mariano’s Defence & Counterclaim |
| 38. In or about 2013, Adrian Valmorbida as director of Golden Fin and as director of Admarval and as director of Vinrose, and Mariano Valmorbida, as director of Golden Fin and as director of Vinrose, decided (the Decision), that: (a) Golden Fin would develop the Avoca Street properties by constructing: (i) on 17 Avoca Street, accessed by a driveway on 19 Avoca Street, five units which would be let by Golden Fin to generate income for the Ferval Trust; and (ii) on 19 and 21C Avoca Street, a home for Adrian Valmorbida Kairu Chan and their children; (the Development); (b) Admarval as trustee of the Admarval Trust would obtain bank finance for such expenses of the Development as could not be met out of distributions from the Ferval trust or the Keck Trust; (c) Golden Fin as trustee of the Ferval Trust would pay the expenses of the Development; (d) Vinrose as trustee of the Keck Trust would distribute money to Admarval to enable it to pay expenses of the Development and to Admarval to enable it to repay the bank finance. | 38. In respect of paragraph 38: (a) except that they deny that there was any valid agreement that 19 and 21C Avoca Street would be developed for the purpose of providing a home for Adrian Valmorbida, Kairu Chan and their children because: (i) the whole of the beneficial interests in 19 and 21C Avoca Street belonged to the Ferval Trust; (ii) any such agreement was not reached with the informed knowledge/consent/authority of Golden Fin, they otherwise: (iii) admit subparagraph 38(a)(i); (iv) deny subparagraph 38(a)(ii); (b) except that they refer to and repeat subparagraph (a) above, and say that Golden Fin’s development of 17, 19 and 21C Avoca Street was to be funded by a loan obtained from Admarval as trustee of the Admarval Trust, they otherwise do not admit subparagraph 38(b); (c) except that they refer to and repeat subparagraphs (a) and (b) above, they otherwise do not admit subparagraph 38(c); (d) except that they refer to and repeat subparagraphs (a) and (b) above, they otherwise do not admit subparagraph 38(d); | 38. In respect of paragraph 38: (a) they deny that there was any Decision made as alleged; (b) they say further or alternatively that if the Decision was made as alleged (which is denied), the Decision: (i) was not made with the informed knowledge/consent/authority of Golden Fin, nor was it made by Adrian Valmorbida in the proper discharge of his duties as a director of Golden Fin, Admarval and Vinrose; and (ii) accordingly, was not a valid or effective exercise of power or discretion by Adrian Valmorbida in his capacity as director and (at the time) the person in effective control of Golden Fin, Vinrose or Admarval; (c) they otherwise deny the allegations therein and say further: (i) on or about 2 June 2016, Golden Fin entered into a design and construction contract (the D&C Contract) with Project Group Construction Pty Ltd (PGC) for the design and construction of a residential apartment development at 17 to 19 Avoca Street, on the terms and subject to the conditions set out therein; and | 38. As to paragraph 38, Mariano: (a) says that on or about 21 September 2015 a letter of offer from Bendigo Bank for a facility of $3,345,000 was signed by: (i) Admarval, in its own capacity and as trustee for the Admarval Trust, as the borrower to assist with construction costs for residential development to be erected at 17-19 Avoca Street, South Yarra; and (ii) Mariano, Adrian, Admarval in its own capacity and as trustee for the Admarval Trust, Adjoval in its own capacity and as trustee of the AVFT, Golden Fin in its own capacity and in its capacity as trustee for the Ferval Trust and Vinrose in its own capacity and as trustee for the Keck Trust, as security providers; (b) says that on or about 2 June 2016, Mariano and Adrian, as directors of Golden Fin, signed a Design and Construct Contract with Project Group Construction Pty Ltd, the full terms and effect of which Mariano will refer to at trial (D&C Contract); and (c) otherwise denies each and every allegation in paragraph 38 of the Amended Claim. |
| 39. Further, in or about 2013, Golden Fin, and Admarval, Adrian Valmorbida and Kairu Chan agreed (the Joint Venture Agreement) that in consideration of the mutual promises that follow: (a) Golden Fin would develop the Avoca Street properties by constructing the Development; (b) Adrian Valmorbida and Kairu Chan would allow Golden Fin to construct a driveway with a permanent right of way on 19 Avoca Street to enable access to an underground carpark on 17 Avoca Street; and (c) Admarval as trustee of the Admarval Trust would obtain bank finance for such expenses of the Development as could not be met out of distributions from the Ferval Trust; | 39. Except that they refer to and repeat subparagraphs 38(a) and (b) above, they otherwise deny paragraph 39. | 39. In respect of paragraph 39: (a) they deny that any Agreement was made as alleged; (b) they say further or alternatively that if the Agreement was made as alleged (which is denied), the Agreement: (i) was not made with the informed knowledge/consent/authority of Golden Fin, nor was it made by Adrian Valmorbida in the proper discharge of his duties as a director of Golden Fin, Admarval and Vinrose; and (ii) accordingly, was not a valid or effective exercise of power or discretion by Adrian Valmorbida in his capacity as director and (at the time) the person in effective control of Golden Fin, Vinrose and Admarval; and (c) they otherwise deny the allegations therein and say further that they refer to and repeat paragraph 39 above. | 39. As to paragraph 39, Mariano: (a) refers to and repeats paragraphs 36(a) to 36(c) and 37(b) above; (b) refers to and repeats paragraphs 38(a) and 38(b) above; and (c) otherwise denies each and every allegation in paragraph 39 of the Amended Claim. |
| 42. On 18 and 19 December 2014, Golden Fin as trustee of the Ferval Trust distributed: (a) 21C Avoca Street to Adrian Valmorbida as a Primary Beneficiary; and (b) the land described in Certificate of title Volume 4551 Folio 068 situated at and known as 48-50 Edwardes Street, Reservoir, to Mariano Valmorbida as a Secondary Beneficiary. | 42. In respect of paragraph 42, they: (a) deny subparagraph (a), and say that the distribution was not effected with the informed knowledge/consent/authority of Golden Fin; (b) admit subparagraph (b). | 42. In respect of paragraph 42: (a) they deny subparagraph (a); and (b) they do not admit subparagraph (b), and they say further that the purported distribution or transfer of 21C Avoca Street to Adrian Valmorbida: (c) was procured by Adrian Valmorbida for no consideration, without the informed knowledge/consent/authority of Golden Fin and in breach of his duties as a director of Golden Fin; and (d) further or alternatively, was not a valid or effective exercise of power or discretion by Adrian Valmorbida in his capacity as director and (at the time) the person in effective control of Golden Fin; and (e) accordingly, at all relevant times, Adrian Valmorbida and Kairu Chan held their interest in 21C Avoca Street on trust for Golden Fin and the Ferval Trust, and they refer to and rely upon the matters alleged and the relief claimed by Golden Fin in respect of 21C Avoca Street in the Golden Fin Proceeding. | 42. As to paragraph 42, Mariano: (a) refers to and repeats paragraph 33(b) above; (b) says that at all material times he reposed absolute trust and confidence in his son, Adrian; (c) says that in the circumstances set out in paragraphs 42(a) and 42(b) above, on 18 December 2014 he: (i) was requested by Adrian to sign on behalf of Golden Fin the Minutes of Board Meeting, the Deed of Distribution and the Transfer of Land which were handed to him by Adrian; (ii) was not told by Adrian the nature and effect of those documents which Adrian had asked him to sign; and (iii) did not question Adrian’s request that he sign those documents on behalf of Golden Fin; (d) in signing those documents, he did not intend to cause Golden Fin to transfer the whole of 21C Avoca to Adrian; (e) by reason of the matters in paragraphs 42(a) to 42(d) above: (i) it is unconscionable for Adrian (and, following is death, his estate) to retain the benefit of 21C Avoca; (ii) the Deed of Distribution is void and of no effect, alternatively ought to be set aside; and (iii) Adrian (and, following his death, his estate) has held 21C Avoca on trust for Golden Fin as trustee for the Ferval Trust; (f) admits the allegation in paragraph 42(b) of the Amended Claim; and (g) otherwise denies each and every allegation in paragraph 42 of the Amended Claim. |
| 47. On 8 April 2016, Golden Fin distributed one of 10 equal undivided shares in 19 Avoca Street to Adrian Valmorbida as a Primary Beneficiary | 47. Except that the distribution was not effected with the informed knowledge/consent/authority of Golden Fin, they admit paragraph 47. | 47. They deny paragraph 47 and say further that: (a) they refer to and repeat paragraph 36 above; (b) the purported distribution or transfer of one of 10 undivided shares in 19 Avoca Street by Golden Fin to Adrian Valmorbida on about 8 April 2016: (i) was procured by Adrian Valmorbida for no consideration, without the informed knowledge/consent/authority of Golden Fin and in breach of his duties as a director of Golden Fin; and (ii) further or alternatively, was not a valid or effective exercise of power or discretion by Adrian Valmorbida in his capacity as director and (at the time) the person in effective control of Golden Fin; and (c) accordingly, at all relevant times, Adrian Valmorbida and Kairu Chan have held their interest (including the one of 10 undivided shares referred to in subparagraph (b) above) in 19 Avoca Street on trust for Golden Fin and the Ferval Trust, and they refer to and rely upon the matters alleged and the relief claimed by Golden Fin in respect of 19 Avoca Street in the Golden Fin Proceeding. | 47. As to paragraph 47, Mariano: (a) refers to and repeats paragraphs 36(a) to 36(c) above; (b) refers to and repeats paragraph 37(b) above; (c) refers to and repeats paragraph 38(b) above; (d) refers to and repeats paragraph 42(b) above; (e) says that in the circumstances set out in paragraphs 47(a), 47(b) and 47(d) above, on 8 April 2016 he: (i) was requested by Adrian to sign: (A) on behalf of Golden Fin the Minutes of Board Meeting and the Deed of Distribution which were handed to him by Adrian; and (B) on behalf of VCPL the Deed of Distribution which was handed to him by Adrian; asked him to sign; and (iii) did not question Adrian’s request that he sign those two documents; (f) in signing those documents, Mariano did not intend to cause Adrian and/or Kairu Chan to own the whole of 19 Avoca; (g) if Mariano had known the nature and effect of the documents handed to him by Adrian on 8 April 2016, he would not have subsequently signed the D&C Contract on behalf of Golden Fin; (h) by reason of the matters in paragraphs 47(a) to 47(g) above: (i) it is unconscionable for Adrian (and, following is death, his estate) and/or Kairu Chan to retain the benefit of 19 Avoca; (ii) the Deed of Distribution is void and of no effect, alternatively ought to be set aside; and (iii) Adrian (and, following his death, his estate) and/or Kairu Chan have held 19 Avoca on trust for Golden Fin as trustee for the Ferval Trust; (i) further or alternatively, says that in the circumstances set out in paragraphs 47(a), 47(b), 47(d) and 47(e) above, on 8 April 2016 Mariano signed the documents handed to him by Adrian in the mistaken belief that Golden Fin was the sole registered owner of 19 Avoca; (j) in signing those documents, Mariano did not intend to cause Adrian and/or Kairu Chan to own the whole of 19 Avoca; (k) if Mariano had known the nature and effect of the documents handed to him by Adrian on 8 April 2016, he would not have subsequently signed the D&C Contract on behalf of Golden Fin; (l) in the circumstances set out in paragraphs 47(a) to 47(e) and 47(i) to 47(k) above: (i) Golden Fin is entitled to recover the whole of 19 Avoca; and (ii) Adrian (and, following his death, his estate) and/or Kairu Chan have held 19 Avoca on trust for Golden Fin as trustee for the Ferval Trust; and, (m) otherwise denies each and every allegation in paragraph 47 of the Amended Claim. |
| 48. On or about 2 June 2016, pursuant to the Joint Venture Agreement, Golden Fin entered a contract with Project Group Construction Pty Ltd for the construction of the Development (the Construction Contract). | 48. Except that they refer to and repeat subparagraph 38(a) above, paragraph 42 above and paragraph 47 above, they admit paragraph 48. | 48. They deny paragraph 48, and refer to and repeat paragraphs 38, 39, 42 and 47 above. | 48. As to paragraph 48, Mariano: (a) refers to and repeats paragraph 38(a) above; and (b) otherwise denies each and every allegation in paragraph 48 of the Amended Claim. |
SCHEDULE OF PARTIES
BETWEEN
KAIRU (ERICA) CHAN First Plaintiff
and
KAIRU (ERICA) CHAN (in her capacity as executor of the
estate of Adrian Valmorbida deceased) Second Plaintiff
and
ADMARVAL PTY LTD
(ACN 119 834 543) Third Plaintiff
and
VALMORBIDA CUSTODIANS PTY LTD
(ACN 609 840 539) First Defendant
and
GOLDEN FIN PTYLTD AS TRUSTEE OF THE FERVAL TRUST
(ACN 109 809 832) Second Defendant
and
MARADVAL PTY LTD AS TRUSTEE OF THE
ADMARVAL DISCRETIONARY TRUST
(ACN 616 314 222) Third Defendant
and
VINROSE PTY LTD AS TRUSTEE OF THE KECK TRUST
(ACN 004 744 307) Fourth Defendant
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